Employment Allowance increase to £5,000
6 April 2022, Companies, Creative Industries, Employer
The employment allowance increase will affect most employers from today 6th April 2022. If you are eligible you can claim a £5,000 deduction against National Insurance Contributions in 2022-23.
Who is eligible for the Employment Allowance Increase?
Businesses and charities who employ people are subject to Employer’s Class 1 National Insurance Contributions (NIC). If you pay any employees more than the Secondary Threshold you have to pay NIC at the rate of 15.05% to HMRC and report the information as part of your Real Time Information (RTI).
These businesses and charities can claim up to £5,000 of employment allowance to reduce their NIC.
How do I claim the allowance?
Eligible employers need to claim the allowance each year. To benefit from the Employment Allowance increase you need to file an Employer Payment Summary (EPS) from your payroll software.
When do I need to file the EPS?
The EPS can be filed any time from 6th April for the current payroll year. The payroll year is the same as the tax year for personal tax – from 6th April to 5th April. We recommend that you file an EPS to claim the Employment Allowance increase before you start to process your April payroll. This will ensure that your National Insurance is calculated with the deduction for the allowance.
Can I claim the allowance for previous years?
You can make a claim for the Employment Allowance up to 4 years after the end of the tax year in which the allowance applies. For example, if you want to claim Employment Allowance for the tax year 2018-2019, you must make your claim no later than 5th April 2023.
Employment Allowance and Single Director Companies
If the only paid employee of a company is also a director, then the employment allowance can’t be claimed. In this case you must make sure that your payroll software is adjusted to deselect any option to claim the allowance. You will need to send an additional EPS after changing this setting in your software so that HMRC knows that you are no longer claiming the reduction if you have previously claimed it.
National Insurance – Secondary Threshold 2022-23
| Pay frequency | Threshold |
|---|---|
| Weekly | £ 175 |
| Monthly | £ 758 |
| Annual | £ 9,100 |
Additional employees
If a single director company hires an additional employee, National Insurance contributions are payable once the salary for that employee exceeds the Secondary Threshold. Where additional employees are also directors, they must be paid more than the annual threshold (£9,100 in 2022/23) for the employment allowance to be claimed. If your other employees are not directors, you follow the threshold for their pay frequency – e.g. an employee on monthly wages need to be paid £758 to claim the allowance.
When you qualify for the employment allowance at any point in the year, it can be claimed for the full year.
General Exclusions
- Sole director / employee (see above)
- Personal / household / domestic worker (eg nanny / cleaner / gardener)
- Public body / commercial business performing majority of services for the public sector
- Service company with only deemed payments of income (IR 35)
- Where another group company already claims employment allowance
Auto Enrolment Pensions
If you are considering hiring additional staff, you will need to have a pension scheme in place that complies with Automatic Enrolment regulations. For advice on setting up a payroll scheme and complying with your pension responsibilities, please get in touch with Alterledger using the form a the bottom of this page.
